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P. 32
MMUNITY NEWS
China’s Corporate
Social Credit System
and Its Implications
By the Stanford Center on China’s Economy and Institutions (SCCEI)
China’s corporate social credit system (CSCS) is rewards) by an array of other agencies in what is
a data-driven scoring system based on a wide effectively a system of collective enforcement.
array of information to rate the “trustworthiness”
of all business entities registered in China. The The data. Researchers collected the first publicly-
researchers conducted the first empirical analysis available credit scores of all 531 A-share listed
of the CSCS based on its implementation in companies headquartered in Zhejiang Province
Zhejiang, the first province in China to publish from the local government website as of July 2021.
scores from the public credit assessment exercise. Fifteen percent of the companies were state-
Their analysis provides preliminary insights into owned and 85% were privately-owned enterprises.
the potential determinants of these corporate
scores and the possible effects of the CSCS on The following five categories comprise the first
firm compliance and behavior. tier of indices measuring each company’s public
credit scores: a) Basic Data aggregates information
China’s corporate social credit system. regarding any dishonest acts or abnormal
The CSCS is a technology-assisted corporate operations committed by key personnel or the
compliance project based on a nationwide business itself (comprising 8% of the total score);
collection of information on every company b) Finance & Taxation includes information on the
registered in China, including foreign firms. creditworthiness of the enterprise (19.5% of the
While still under construction nationwide, two total score); c) Governance aggregates information
basic types of information will be collected related to an enterprise’s product quality, safety
on each company once the CSCS is fully record, and environmental compliance (9% of
operational: a) public credit information, the total); d) Compliance aggregates information
gathered from regulatory agencies, central and regarding the firm’s record of adherence to rules
local governments, and the judiciary regarding and judgments issued by government agencies
fines, judgments, business licenses, and credit and judicial authorities (45% of the total); and e)
information associated with the enterprise; Social Responsibility aggregates information on
and b) market credit information, generated by awards from government organs, CCP-sanctioned
consumers, industry associations, third-party charitable donations, and volunteer activities
credit rating agencies, and by the enterprise itself (18.5% of the total).
regarding the company’s financial, management,
and contract performances. The largest payoff. The researchers find that
74.2% of the listed firms in Zhejiang are rated
The CSCS is linked to a system of rewards Excellent, while only about 2% of the firms are
(red listings) and punishments (black listings)
maintained by government agencies. Inclusion Average scores of first-level indicators measuring company public
on the black list triggers market barriers, such as credit scores
restrictions on obtaining government approvals,
greater frequency of inspections, and prohibitions
on obtaining credit or issuing stock. Inclusion
on the red list can confer a variety of benefits,
ranging from expansion of access to loans to
a reduction in the frequency of inspections.
Importantly, because data on rewards and
punishments are centralized, black listing (or red
listing) by one agency can trigger punishments (or
29 AMCHAM SOUTH CHINA
China’s Corporate
Social Credit System
and Its Implications
By the Stanford Center on China’s Economy and Institutions (SCCEI)
China’s corporate social credit system (CSCS) is rewards) by an array of other agencies in what is
a data-driven scoring system based on a wide effectively a system of collective enforcement.
array of information to rate the “trustworthiness”
of all business entities registered in China. The The data. Researchers collected the first publicly-
researchers conducted the first empirical analysis available credit scores of all 531 A-share listed
of the CSCS based on its implementation in companies headquartered in Zhejiang Province
Zhejiang, the first province in China to publish from the local government website as of July 2021.
scores from the public credit assessment exercise. Fifteen percent of the companies were state-
Their analysis provides preliminary insights into owned and 85% were privately-owned enterprises.
the potential determinants of these corporate
scores and the possible effects of the CSCS on The following five categories comprise the first
firm compliance and behavior. tier of indices measuring each company’s public
credit scores: a) Basic Data aggregates information
China’s corporate social credit system. regarding any dishonest acts or abnormal
The CSCS is a technology-assisted corporate operations committed by key personnel or the
compliance project based on a nationwide business itself (comprising 8% of the total score);
collection of information on every company b) Finance & Taxation includes information on the
registered in China, including foreign firms. creditworthiness of the enterprise (19.5% of the
While still under construction nationwide, two total score); c) Governance aggregates information
basic types of information will be collected related to an enterprise’s product quality, safety
on each company once the CSCS is fully record, and environmental compliance (9% of
operational: a) public credit information, the total); d) Compliance aggregates information
gathered from regulatory agencies, central and regarding the firm’s record of adherence to rules
local governments, and the judiciary regarding and judgments issued by government agencies
fines, judgments, business licenses, and credit and judicial authorities (45% of the total); and e)
information associated with the enterprise; Social Responsibility aggregates information on
and b) market credit information, generated by awards from government organs, CCP-sanctioned
consumers, industry associations, third-party charitable donations, and volunteer activities
credit rating agencies, and by the enterprise itself (18.5% of the total).
regarding the company’s financial, management,
and contract performances. The largest payoff. The researchers find that
74.2% of the listed firms in Zhejiang are rated
The CSCS is linked to a system of rewards Excellent, while only about 2% of the firms are
(red listings) and punishments (black listings)
maintained by government agencies. Inclusion Average scores of first-level indicators measuring company public
on the black list triggers market barriers, such as credit scores
restrictions on obtaining government approvals,
greater frequency of inspections, and prohibitions
on obtaining credit or issuing stock. Inclusion
on the red list can confer a variety of benefits,
ranging from expansion of access to loans to
a reduction in the frequency of inspections.
Importantly, because data on rewards and
punishments are centralized, black listing (or red
listing) by one agency can trigger punishments (or
29 AMCHAM SOUTH CHINA
